Connecticut lawmakers are taking on their state’s large hedge fund industry with a bill that would impose greater transparency requirements.

The Connecticut State Senate on Tuesday approved a measure that would force Nutmeg State-based hedge funds and private equity firms that are not registered with the Securities and Exchange Commission to play by the federal regulator’s material conflicts of interest rules anyway.

“We all value transparency and fair disclosure, and in the wake of the greatest breakdown in our financial industry since the Great Depression, these requirements are beneficial to the consumer without being onerous on the industry,” Sen. Bob Duff, a longtime champion of the measure, said.

If the U.S. Congress acts on hedge fund regulation by Dec. 31—and Democratic leaders have promised to do so—the Connecticut bill would be shelved.

Even if Congress fails to act, the bill’s prospects of becoming law are unclear. The state House of Representatives must approve it, as must Gov. Jodi Rell, a Republican.

Certainly, Rell’s fellow Republicans in the Senate were not shy about blasting the bill, which they say threatens Connecticut’s position as the third-largest hedge fund center in the world, behind nearby New York and London.

“They can go wherever they want to,” Sen. John McKinney, the Senate minority leader, said of hedge funds.

From the current issue of

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